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Special report profile: HSR B2B's Web gamble

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Like many CEOs in this era, Rick Segal is betting his company on the Internet. Segal, who co-founded Hensley Segal Rentschler with Mike Hensley and Tom Rentschler, is spearheading a transformation of the Cincinnati-based ad agency into an Internet professional services firm called HSR Business to Business.

The three founders divided their firm into three parts: HSR Internet services, HSR consulting and HSR marketing communications. Hensley, who is president of the Internet services group, says HSR's focus on the b-to-b arena--clients include GE Plastics and a Xerox Corp. division--serves the firm well because these clients grapple with the Internet and its effect on their businesses relationships.

In particular, HSR B2B's more than 20 years of experience helping companies market through distribution channels has been invaluable, since the Internet often changes the relationship between manufacturers and their channel partners.

While manufacturers can sell direct on their own Web sites, bypassing distributors can be a dual-edged sword, politically and logistically. Aside from the repercussions in the distributor channel, it can mean taking responsibility for aggregation of products and provision of services that were traditionally handled by the channel.

"Companies have to ask themselves, can they afford to sell directly?" Hensley said. HSR B2B has helped its clients handle potential channel conflicts in different ways. With food-service equipment manufacturer Hobart Corp., HSR B2B helped the company pursue a strategy of selling direct, but keeping distributors in the loop as "preferred online dealers" who handle fulfillment. Another HSR B2B client, Pall Gelman Laboratory, a subsidiary of Pall Corp., which manufactures filtration products, has avoided channel conflict by selling items not usually stocked by distributors.

"Many of our clients have moved forward on the Internet in ways that do not disrupt the current channels," Hensley said. "In the same vein, they look for opportunities to go to smaller markets where they could not afford to go in the offline world."

For his part, Segal remains confident in HSR B2B's gamble on the Web. "Even if 99% of the Internet were to evaporate in the heat of the next new, new thing, it would remain the backbone medium of business-to-business marketing communications," he said. "That's why we've been willing to be so aggressive."